The cost of health care administration: Is health care too complex for automated, standardized payment processes?

Yes, it’s true that medicine, health care and patients all are complex topics that may be challenging. But other nations have mastered that complexity in ways that leave behind the United States. Kevin Schulman, MD, MBA, an internal medicine physician and professor of medicine at Stanford University, explains why U.S. health care is making things more complicated than they need to be in health care administration.

Medical Economics: Is health care too complex to borrow lessons from other business sectors to lessen administrative burdens?

Kevin Schulman, MD, MBA: If patients are complex — we've looked at other markets. So we've looked at the administrative costs, billing transaction costs in the U.S. and other markets. The Netherlands has a private multi-payer market, a very high-performing health care system, life expectancy greater than the United States, and their transaction costs are 1/10 of ours. Yes, it's complex, but people have mastered that complexity in lots of different ways. We make it more complex by making an analog. Underlying our system, everyone talks about prior authorization. What's prior authorization? A health plan says, well, I want to make sure that there's a reason to order this $5,000 test, or do this procedure, based on whatever clinical criteria they come up with, if they even have a standard set of clinical criteria. And then they ask for clinical documentation. So what's clinical documentation? Analog, text, fill out a form, send a fax. The only place we use faxes in the United States right now is in health care, to communicate with health plans. And then someone has to read it and decide, make a judgment, well, is this justified or not based on our criteria? Totally an analog process. And then they go back, and then maybe they reject the claim. Then we got to do an appeal, and then we get on the phone. We have this peer-to-peer evaluation thing where someone at the health plan gets on the phone with the doctor to see why they're doing this. Well, the health plan has not taken care of the patient. But totally, totally an analog process. So we just spent, you know, $500, a thousand dollars on utilization review when there's a 97 to 99% chance they're going to approve this thing anyway. Like, what's the value of all that?